"They've" Got Us Believing...

Not that I know who "they" are, but they've got us (with "us" defined as the
majority of the investing world) believing that...

It is fine and normal for gold and the stock market to bull concurrently.

That the US Dollar can be depreciated ceaselessly to good economic ends.

That some commodities and the "China story" are not currently a bubble, in
cyclical terms at least.

That this time it is different, no really! The Fed will ease up on
rates with stocks, commodities and gold all at multi-year, or multi-decade
highs.

That the Fed even has much say in how high short term rates can go.

That this magic show, whereby a formerly great superpower sacrifices it's
productive sectors, consumes on credit and feeds off of global labor arbitrage
can go on and on without consequence.

Well, I would suggest we all keep in mind the old axiom, which is hyper-amplified
in importance to investors, "if everybody believes something to be true, chances
are it isn't".

I could go on about the yield spread, the state of longer term treasury yields
and the dollar/euro interplay, all of which is tracked on the website, but
for the purposes of this article, I would like to keep things simple; It is not different
this time. Sure, we can bull on in the near-term with copper going to $4 (that
China's sure got a huge appetite!), the Dow to 12,000, gold to 850 and slap-happy
silver U-turning back north. But it is not different this time. Manias are
truly awesome even after they end, at which point the the action is even more
awesome to the downside. Prechter will finally be right, but timing is always
an issue, which is why we temper what we think we know with what we see on
a daily basis.

Gold should shortly begin to separate itself from all this nonsense. Messrs.
Hoye, Mackenzie and Saville among others understand and have accurately taught
that gold is the one asset that should outperform all others in a period of
economic contraction, which I believe is around the bend. Sure, the dollar
should firm and even rise, but it is intrinsically worthless, given its debt
load, so I hesitate to even call it an asset. A liquidity vehicle may be more
appropriate.

It seems everybody is buying into the China/commodities miracle. Heretofore
commodities bull Peter Grandich's well-timed
piece offers a different view for your consideration. As the owner of a
productive American business, I will say that conditions, at least in our healthcare
manufacturing niche, remain brisk. But can we really conclude that a "sector" such
as mortgage finance for instance will not be a major drag due this rising rate
cycle just as it was the primary fuel for the boom to begin with? The mainstream
financial community have become raging commodity bulls, which alone makes me
more than cautious on all but one of the "inflation-trade" assets. Even if
China, India and the developing world truly are destined for 21st century ascendancy,
so too was America until it hit a speed bump in 1929.

The advice is so simple it will seem nonsensical to today's raging bulls;
stay grounded, go by what you see and not by what the mainstream gurus tell
you you see, and prepare for a simpler, more fundamentally sound lifesyle.

Disclaimer:http://www.nftrh.com does
not recommend that any trading or investment positions be taken based on views
expressed on this site. If you speculate or invest it is suggested that you
consult a financial advisor qualified in your area of interest.